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House prices rise 20.5% for the year

Wednesday 17th December 2003

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The threat of rising interest rates (and an actual increase from Westpac Bank) failed to take any of the steam out of the housing market in November when the national median house price hit yet another record, although the number of sales dipped slightly to a still high level.

The national median house price rose from $227,000 in October to $235,000 which was a massive 20.5% higher than the $195,000 median price in November last year.

Real Estate Institute president Graeme Woodley doesn't think rising rates will affect the market much while immigration and a housing shortage in some places continue to support prices.

The particular hotspots in November were Otago where the median price jumped 6.5% from October and was up 34.6% from November last year, Taranaki, up 4.9% on October and 22.2% up on November last year, and Hawkes Bay, up 4.2% on October and up 28.6% on November last year.

But the heat wasn't universal. Southland's median house price fell 13.1% to $115,990, although that simply highlights what a rogue figure October's $133,500 was. The November figure was up 37.5% on last November, the highest annual regional rise with the exception of Nelson/Marlbourough where the median price was up 48.7% at $261,000 compared with November last year.

But in the key Auckland market, the median house price fell 1.8% to $320,000 from October and that was 14.3% higher than in November last year. Northland was the other region to experience a fall in November, down 4.6% to $176,500 from October, which was up 11.9% on November last year.

The number of days it took to sell a house in November remained at the record low 24 days set in October - in Canterbury/Westland that was down to just 17 days and it was only 19 days in Otago.

On the activity front, there were 10,722 houses sold in November compared with 10,923 in October. That was still well up on the 9,832 homes sold in November 2002.

Deutsche Bank senior economist Darren Gibbs notes that sales are running at "a massive 57.7% above the average level since January 1990."

He suggests that strong sales of apartments may explain the decline in Auckland's median price.

Gibbs says the pricing momentum has been much stronger than he expected and "the balance of risks, at least in the near term, would appear weighted towards further upside surprises."

He notes the wholesale interest rate market currently is pricing in a 65% chance of a rise in the Reserve Bank's official cash rate by the end of January.

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